WILMINGTON, Del. – A judge gave preliminary approval Tuesday to failed electric-vehicle maker Fisker Automotive’s description of its proposed bankruptcy plan, despite expressing concerns that the bankruptcy case was moving too rapidly.
Judge Kevin Gross granted interim approval of the disclosure statement describing Fisker’s bankruptcy plan and the process for soliciting votes from creditors after attorneys for the official creditors committee assured him that they agree with the current case schedule.
Fisker, which had planned to build cars at a former General Motors plant in Delaware, filed for bankruptcy protection last month, ending a long, downward spiral that began after it received a $529 million loan commitment from the U.S. Department of Energy.
Hybrid Technology LLC, owned by Hong Kong billionaire Richard Li, is seeking to buy Fisker in bankruptcy after paying $25 million for DOE’s outstanding loan, resulting in a loss to federal taxpayers of $139 million.
Fisker’s plan calls for the transfer of substantially all of its assets to Hybrid in a private sale. Hybrid would use a $75 million credit bid based on the secured loan it holds to take ownership of Fisker. Hybrid, upon completion of the sale and consummation of the Chapter 11 plan, also would waive $4 million in claims from its proposed role in providing financing to Fisker during the bankruptcy case.
A hearing to determine whether the court should approve the sale is scheduled for Jan. 3.
Attorneys for Fisker’s official committee of unsecured creditors, which was formed just a few days ago, told the judge in court documents this week that they were still gathering information and needed more time before recommending whether unsecured creditors should vote to accept the plan by the Dec. 30 deadline.
But committee attorney Sunni Beville told Gross on Tuesday that the committee believes the current case schedule will hold Hybrid’s “feet to the fire,” and is in the best interest of unsecured creditors, whose claims are estimated at about $250 million.
Gross did grant a request by the committee that any vote-solicitation materials sent to creditors by Fisker include a letter from the committee advising creditors not to submit their ballots until the committee recommends a vote for or against Fisker’s plan.
Before granting conditional approval of the disclosure statement, Gross expressed concerns about the rapidity with which the case was moving, and attorneys took his advice to take a break in the hearing and talk about the schedule.
Fisker attorney Ryan Preston Dahl told Gross that the more time and money spent in the bankruptcy process will result in smaller potential recoveries for creditors.
“It is absolutely essential that we keep the timing that we have,” he said.
Dahl also noted that the asset purchase agreement with Hybrid can be terminated without cost if a better offer comes along, but that he doesn’t think that will happen.
Meanwhile, attorneys for 157 former Fisker employees abruptly laid off in April are challenging the company’s bankruptcy financing plan, which is the subject of a hearing Monday.
The former employees, who have filed a federal lawsuit in California over inadequate notice of the layoffs, argue that Fisker’s bankruptcy financing agreement with Hybrid improperly infringes on the priority of their wage claims.